Using a Corporation for Liability Protection

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While most small businesses know that incorporating can shield personal assets in the event of a frivolous lawsuit, many are lulled into complacency by an “it-won’t-happen-to-me” attitude. This thinking has resulted in tremendous losses for many unprepared business owners. Given these statistics, it’s not hard to see why:

  • Over 15 million civil lawsuits are filed each year in the U.S.
  • Almost 20 percent of all lawyers worldwide practice in the U.S.
  • The U.S. has one lawyer for every 227 residents. Compared to Japan, for example, where there is only one lawyer for every 8,412 residents.
  • Chances of being involved in a lawsuit are estimated at one in four in the next two years.

Corporations are used in the business world today primarily for liability protection. Corporations came into existence to limit the direct responsibility for the participants for the faults or debts of a business. An individual can invest money in a corporation and the investor’s potential loss will be limited to the amount of money invested and no more.

If a corporation gets itself into a lawsuit, the outcome of that lawsuit can affect the corporation directly, but the participants generally cannot be held responsible, except if corporate formalities have not been maintained or in the case of fraudulent activity.

Because of the obvious advantages of limiting the amount of personal liability that one takes on by operating through a corporation, many strategies have been developed to protect the assets of businesses that have potential lawsuit risk. In addition, other strategies have been developed to protect the assets of individuals because of our litigation-crazy society.

If  you need help to ensure you are properly protected, please contact a Nevada Corporate Headquarters Representative at 1-800-508-1729, Monday thru Friday,8 am-5 pm PST.

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